Stop Cash Shrink

Hoping to reduce the threat to public safety and the risk of a federal crackdown, California officials are trying to develop a new cannabis banking system — one that enables regulators to track pot transactions and gives financial institutions confidence that they won’t get in trouble for working with marijuana businesses.

The goal of the Brown administration’s proposal is to encourage a network of smaller banks to open accounts for pot shops, growers and other cannabis businesses. Those banks would be given access to state databases of cannabis businesses to make sure the ones they are serving are licensed and remain in compliance. Marijuana-related transactions handled by these smaller banks would pass through a larger “correspondent bank” that would hold accounts from banks that are doing business with marijuana firms. Special state inspectors would be based at the correspondent bank to monitor the movement of money and detect suspicious behavior.

The idea is to give banks some assurance that they can serve marijuana customers without running afoul of federal banking guidelines. As more banks serve cannabis businesses, more of the transactions will shift from cash to credit cards and electronic funds transfers. That makes the industry safer and easier to regulate, which is good for California.